Musk’s SpaceX-Tesla merger remarks worry deal insiders

Elon Musk's public support for a possible $3.5 trillion merger between SpaceX and Tesla ↗ 4.23% has unsettled some people involved in the talks. They worry his comments could draw shareholder scrutiny and push the process back by several weeks, Reuters reported exclusively on Oct. 22, citing a person with direct knowledge of the discussions. The person said the disclosure created a "mess" because it could raise questions about how well Tesla shareholders' interests are being protected.au.finance.yahoo.com

The concern comes two days after Musk confirmed, on SpaceX's earnings call on Tuesday, Oct. 20, that the companies are exploring a combination. "I think it would be a good idea, but it's really up to the special committees of both companies," Musk told investors. He said that as "a conflicted party" he could not take part in their discussions. He also cautioned that the committees had not agreed on terms and might never do so.reuters.com

Early-Stage Talks

Both sides have hired advisers, but discussions are at an early stage, three sources told Reuters. According to the same report, SpaceX approached Tesla in recent weeks. The structures under discussion include a SpaceX acquisition of Tesla or a merger under a newly formed holding company, possibly as an all-stock deal. Advisers are also working with Musk's lawyers to keep him recused. Tesla, SpaceX and Musk did not respond to Reuters' requests for comment.reuters.com

People involved in the process note that interested parties usually avoid giving public opinions while independent directors weigh a deal. Musk owns nearly a fifth of Tesla and just under half of SpaceX. Analysts have said a merger would give him control of the combined company. Musk has also noted that the Tesla side would need approval from a majority of all outstanding shares.reuters.com

The SolarCity Shadow

Some participants see parallels with Tesla's 2016 purchase of SolarCity. That deal led to years of litigation in which shareholders argued that Musk's involvement and public support made it unfair, Reuters noted. Courts ultimately upheld the acquisition, though Tesla directors settled related claims for $60 million.reuters.com

Columbia University law professor Eric Talley said Tesla's move to Texas makes any legal challenge harder to predict. "The Texas thing is a wild card," he told Reuters. He added that litigation risk would depend on the deal terms. "Who's going to get the better side of this deal? And that's usually what gives rise to litigation," Talley said.

Regulators around the world are also expected to examine any deal closely, given Tesla's business in China and SpaceX's work on US defense and artificial intelligence. Even analysts who back the deal see a high bar. "A deal where one man runs both sides will draw tough questions on governance," eToro analyst Josh Gilbert told Reuters.reuters.com